China: The Fourth Amendment To The Patent Law Seeks To Significantly Strengthen Enforcement Of Patents In China

Last Updated: 2 April 2019
Article by Gary N. Hnath and Logan H.N. Xie

Introduction

This article provides an overview of the recently proposed fourth amendment to the patent laws of China that will dramatically increase the effectiveness of enforcing patents in China and, correspondingly, increase the value of obtaining patent protection in China.

Background

Since the release and enactment of the Notice of the State Council on Issuing the Outline of the National Intellectual Property Strategy, China has made rapid progress in various aspects of intellectual property, including the creation, application, and protection of intellectual property. The number of filings of applications for all kinds of intellectual property to the State Intellectual Property Office of China ("SIPO"), including patents, trademarks and design patents, are now all ranked number one in the world.

The four most important bodies of legislation in the development of China's intellectual property laws are Patent Law, Trademark Law, Copyright Law and Anti-Unfair Competition Law. As the most important legislation regarding protection of technological innovation, the Patent Law was released in 1984 and has been amended three times, with a fourth amendment to come in the near future. To promote the development of medicines, chemical substances and the food industry in China, and to integrate Chinese intellectual property law into the global community, the first amendment in 1992 lifted restrictions on awarding patents for medicines, chemical substances and food items. The second amendment in 2000 amended parts of the original Patent Law that were inconsistent with WTO rules. The third amendment in 2008 made adjustments to accommodate the needs of the present development stage in China.

From Proposal to Amendment

The fourth amendment was first put forward by director general Changyu SHEN of the National Intellectual Property Administration during the National People's Congress and the Chinese People's Political Consultative Conference in 2018. In April 2018, the Standing Committee of the National People's Congress made the amendment of the Patent Law explicit in the 2018 legislative work plan. On 4 December 2018, 38 departments, including the National Development and Reform Commission and the People's Bank of China, issued a notice of the Memorandum of Cooperation on Joint Punishment of Dishonest Entities in the Field of Intellectual Property (Patent). On 5 December 2018, the standing committee of the State Council passed the draft of the fourth amendment and submitted it to the standing committee of the NPC for review. The official passage of the amendment is expected in 2019.

Changes proposed to the Patent law

1. Damages/compensation

The proposed fourth amendment makes several important changes that will significantly enhance the protection and enforcement of patents in China. The parts relevant to damages, which are the key provisions of the amendment, have received the widest attention. Most of the existing Chinese legislation regarding patent damages is based on the principle of compensation, not punishment. In addition, the existing legislation sets a cap of one million RMB on the maximum compensation, and courts, considering factors such as the scale of infringement and patent contribution rate, tend to award only a small amount of damages. This makes the cost of infringement low and encourages repetitive infringement or wilful infringement of patent rights.

In order to promote the protection of intellectual property in China, the proposed amendment makes punitive damages available to combat intentional infringement and raises the amount of damages and fines available in cases of intentional infringement of patent rights, thereby increasing the cost of infringing intellectual property. The amendment is also a positive response to President XI Jinping's proposal in his speech at the China International Import Expo opening ceremony that China should protect the legitimate interests of foreign-owned enterprises and punish intellectual property infringement.

In accordance with these principles, the draft of the fourth amendment makes it clear that the People's Court can set the amount of damages by no less than one time but no more than three times a certain amount, based on factors such as the content, scale and circumstances of the infringing act. The People's Court can also assess damages above 100,000 RMB and below 5 million RMB, depending on factors such as the type of patent right, the nature of the infringing act, and the circumstances of the infringement. These provisions will greatly enhance right holders' confidence in China's intellectual property protection, reduce wilful infringement and repetitive infringement, more effectively compensate the losses of right holders, and promote the prosperity of new innovations in the market.

2. Burden of proof

Provisions that shift the burden of proof to the infringer under certain circumstances have also received wide attention. The principle of burden of proof in Chinese Civil Litigation Law - "the burden of proof always lies with him who alleges" - has caused difficulties for right holders and even resulted in situations where the cost of protection of intellectual property rights is greater than the cost of infringement.

According to the current burden of proof principle, the rights holder often finds it difficult to prove that it is the infringing act that has caused a decline in market share, lowered retail prices, increased costs, and reduced revenues. It is often extremely difficult for the rights holder to obtain direct proof of infringement, and the losses resulting from the infringement, based solely on public information such as the name, address, registered capital, employee number, and scope of business of the infringer.

According to the new provision on the burden of proof in the Patent Law, an entity or individual manufacturing an identical product must provide proof of the differences between the process used in the manufacture of its product and the patented process. In other words, the burden of proof is reversed in disputes over patent infringement involving a patent covering a manufacturing process for a new product. The draft contains additional provisions relating to the burden of proof. For example, where the rights holder has made an effort to provide proof of damages but the information about the extent of the infringement is in the possession of the infringer, the People's Court can order the infringer to provide the relevant accounting books and materials in order to ascertain the amount of damages. If the infringer fails to provide, or provides fake, accounting books or materials, the People's Court can decide the amount of damages according to the right holder's claim and evidence provided.

3. Liability of network service providers in cases of infringement over the Internet

In addition, the draft of the fourth amendment clarifies the joint and several liability of network service providers in cases of infringement using the Internet. The draft provides that the patentee or interested party may, based on an effective judgment, ruling or mediation document of the People's Court, or a decision made by the relevant patent administrative department, order the cessation of the infringement, and require the network service provider to take necessary measures such as deletion, blocking and disconnecting links to infringing products. If the network service provider fails to take necessary measures in a timely manner after receiving the notice, it then becomes jointly and severally liable for the infringement. The draft clarifies that the burden of proof is on the infringer to provide relevant materials relating to the infringement, but emphasizes that the network service provider is jointly and severally liable if it fails to prevent the infringement.

Conclusion

Thus, the fourth amendment, as proposed, makes important changes in the patent law that will significantly strengthen enforcement of patents and, in doing so, increase the value of obtaining patents in China.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2019. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
CCPIT Patent & Trademark Law Office
CCPIT Patent & Trademark Law Office
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
CCPIT Patent & Trademark Law Office
CCPIT Patent & Trademark Law Office
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions